rcm glossary

Managed care

Managed care is a healthcare delivery system that coordinates and manages medical services to control costs and improve patient outcomes.

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What is Managed Care?

Managed care is a term commonly used in the healthcare industry to describe a system of healthcare delivery that aims to control costs while ensuring the quality and accessibility of healthcare services. It is a comprehensive approach that involves the coordination and management of healthcare services for a specific group of individuals, typically through a network of healthcare providers and insurance plans.

Managed care organizations (MCOs) play a central role in the implementation of managed care. These organizations negotiate contracts with healthcare providers, such as hospitals, physicians, and specialists, to create a network of providers who agree to deliver services to the members of the managed care plan. MCOs also work closely with insurance companies to administer the financial aspects of healthcare, including claims processing and reimbursement.

The primary goal of managed care is to provide cost-effective healthcare services without compromising the quality of care. By implementing various strategies, such as utilization management, disease management, and preventive care, managed care organizations aim to improve health outcomes and reduce unnecessary healthcare expenses.

Key Features of Managed Care

To better understand managed care, it is important to explore its key features and components. These features distinguish managed care from other healthcare delivery models and highlight its unique characteristics.

Some of the key features of managed care include:

1. Provider Networks:

Managed care relies on a network of healthcare providers who have agreed to provide services to the members of the managed care plan. These networks can include primary care physicians, specialists, hospitals, laboratories, and other healthcare facilities. The providers within the network are typically selected based on their ability to deliver high-quality care at a reasonable cost.

2. Gatekeeping:

Gatekeeping is a feature commonly associated with managed care plans. It involves the assignment of a primary care physician (PCP) who acts as a gatekeeper to coordinate and manage the patient's healthcare. The PCP serves as the first point of contact for the patient and is responsible for referring them to specialists or other healthcare services when necessary. This gatekeeping function helps to control costs and ensure appropriate utilization of healthcare resources.

3. Utilization Management:

Utilization management is a strategy employed by managed care organizations to monitor and control the use of healthcare services. It involves reviewing and approving requests for medical procedures, tests, and treatments to ensure they are medically necessary and cost-effective. Utilization management programs may include pre-authorization requirements, concurrent review, and retrospective review to evaluate the appropriateness and efficiency of care.

4. Care Coordination:

Managed care emphasizes the coordination of care across different healthcare providers and settings. Care coordination aims to ensure that patients receive the right care, at the right time, and in the most appropriate setting. This coordination helps to avoid duplication of services, reduce medical errors, and improve the overall patient experience.

5. Financial Incentives:

Managed care often incorporates financial incentives to encourage cost-effective and high-quality care. These incentives can take the form of bonuses or shared savings for providers who meet certain performance targets, such as reducing hospital readmissions or achieving better health outcomes. Similarly, patients may be incentivized to choose providers within the network or engage in preventive care through lower out-of-pocket costs or enhanced benefits.

Managed Care vs. Fee-for-Service

To fully grasp the concept of managed care, it is essential to understand how it differs from the traditional fee-for-service (FFS) model, which has been the predominant healthcare reimbursement system in the past.

Here are some key differences between managed care and fee-for-service:

1. Payment Structure: In fee-for-service, healthcare providers are paid for each service or procedure they deliver, regardless of the outcome or quality of care. Managed care, on the other hand, typically involves a predetermined payment structure, such as capitation or bundled payments, where providers receive a fixed amount per patient or per episode of care. This payment structure incentivizes providers to deliver cost-effective care and manage resources efficiently.

2. Care Coordination: Managed care places a strong emphasis on care coordination, ensuring that patients receive comprehensive and coordinated care across different providers and settings. In fee-for-service, care coordination is often limited, and patients may need to navigate the healthcare system on their own, potentially leading to fragmented care and unnecessary utilization of services.

3. Utilization Management: Managed care organizations employ utilization management techniques to control the use of healthcare services and ensure their appropriateness. Fee-for-service does not typically involve utilization management, which can result in overutilization of services and unnecessary healthcare expenses.

4. Provider Network: Managed care relies on a network of healthcare providers who have agreed to deliver services to the members of the managed care plan. Fee-for-service does not require providers to be part of a specific network, allowing patients to choose any provider who accepts their insurance.

Examples of Managed Care Organizations

To provide a clearer understanding of managed care, let's explore some examples of managed care organizations that operate in the healthcare industry:

1. Health Maintenance Organizations (HMOs): HMOs are one of the most common types of managed care organizations. They typically require members to select a primary care physician (PCP) from a network of providers. The PCP serves as the gatekeeper and coordinates the patient's healthcare. Referrals to specialists are usually required for non-emergency care. HMOs often have lower out-of-pocket costs for members but limit the choice of providers to those within the network.

2. Preferred Provider Organizations (PPOs): PPOs offer more flexibility in choosing healthcare providers compared to HMOs. Members can seek care from both in-network and out-of-network providers, although out-of-network care usually comes with higher out-of-pocket costs. PPOs do not require referrals from a PCP, allowing members to see specialists without prior authorization.

3. Accountable Care Organizations (ACOs): ACOs are a relatively newer model of managed care that focuses on improving care coordination and quality outcomes while controlling costs. ACOs consist of a network of healthcare providers, including hospitals, physicians, and other healthcare professionals, who work together to deliver coordinated care to a defined population. ACOs often enter into value-based contracts with payers, where they are financially rewarded for achieving quality and cost targets.

4. Managed Medicaid Plans: Many states have implemented managed care for their Medicaid programs. Managed Medicaid plans contract with MCOs to deliver healthcare services to Medicaid beneficiaries. These plans aim to improve care coordination, manage costs, and enhance the quality of care for low-income individuals and families.

In conclusion, managed care is a comprehensive approach to healthcare delivery that focuses on controlling costs, ensuring quality care, and improving access to healthcare services. It involves the coordination and management of healthcare services through a network of providers and insurance plans. Managed care organizations play a central role in implementing managed care strategies, such as provider network management, gatekeeping, utilization management, and care coordination. By understanding the key features and differences between managed care and fee-for-service, healthcare professionals and stakeholders can navigate the complex landscape of healthcare reimbursement and delivery more effectively.

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